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Capital gains accruing from these transactions,

it will provide an opportunity to the state to tax

these capital gains appropriately. This will act

as a double-edged weapon against black

money. On the one hand, it will slow down the

transactions in urban property thus breaking the

back of the speculative boom and on the other,

it will bring more revenue to the state.

Dr. K.N. Kabra examining Bhaduri'sproposal mentions : "The political pre-

conditions for making such a move are not

vastly different from those involved in

nationalisation of such properties. The

feasibility of the proposed remedy on political

grounds does not seem to be meaningfully

different from that associated with ceilings etc."

Kabra, therefore, presents a modified

proposal. Since most of the urban property

created with the help of black incomes is

registered at understated values, Kabrarecommends that the state should acquire the

right to compulsorily purchase properties at

their understated purchase price or construction

costs. For this purpose, he also suggests the

setting up of a public sector Real Estate

Corporation or a number of such corporations

with adequate resources and endowed with the

task of mandatory purchase of undervalued

properties. To enhance the effectivity of the

measure, Kabra considers it essential that the

right to transfer use of property by means ofgranting power of attorney be restricted. This

will limit benami sales or real estate. Kabra

further mentions : "To increase the effectiveness

of the measure, a ceiling on an all-India basis

on the total value of urban estates can also be

enforced."36

The basic idea underlying both the

proposals is to limit the use of black money in

real estate and enable the State to appropriate

the gains arising therefrom.

Both Kabra and Amit Bhaduri recommend the

setting up of Public Sector Corporations to

purchase properties at the values understated

or otherwise by the sellers of such properties.

The ultimate aim of both the proposals is to

seriously limit investment of black incomes in

real estate. Kabra goes to the extent of saying that

an all- India ceiling on total value of urban

estates should also be enforced to improve the

effectivity of the remedy. If that were so, it onlyimplies that whereas the fundamentalist

proposition is rejected by Kabra, he

imperceptibly and implicitly moves nearer to

fundamentalist position. The proposals of

appropriating the gains of investment of black

income in real estate should be given a fair and

honest trial. One more comment which seems

pertinent must be made in this context. It would not

be advisable to reject Bhaduri's proposal on the

basis of administrative feasibility as Kabra does. If

this position is taken, the same criticism becomes

equally applicable to Kabra's proposal.

To consider the economic system a slave of the

present administrative set-up will prevent us from

taking up any task of gigantic dimensions. To tame

parallel economy is a gigantic task and if a

meaningful dent has to be made in it, then the

administrative set-up must be geared to meet the

challenge.

(iv) Donations to political parties and

electoral reformsWith growing political instability

and galloping inflation, election expenses ofpolitical parties have been mounting. To meet these

expenses, political parties accept donations from

traders, businessmen, industrialists, transport

operators. The ban on company donations to

political parties introduced in 1968 opened the

backdoor of black money coffers funding the

process. All political parties are, in theory at least,

opposed to this dependence but have so far not

created an alternative. In March 1974, the Congress

Parliamentary Party proposed to establish a state

fund to meet electoral expenses. In 1976, theGovernment announced its intention to repeal the

ban on company donations but did not formally

bring forth a bill to this effect. Even during the

Janata Party regime a detailed proposal for a state

fund of the order of Rs. 60 crores to finance the

electoral expenses of recognised political parties

was initiated by Mr. Morarji Desai, but before a

shape to this proposal was given, the Janata

Government itself collapsed. But since donations

to political parties weaken the Government resolve

to take action against black money operators, the

sooner the symbiotic relationship between black

money and political power is broken, the better

shall it be for the country.

(iv) Expansion and improving the

efficiency of the public sector as a

countervailing powerSome economists have

recommended the expansion of public sector as a

countervailing power to control the adverse impactof black money. Kabra, for instance, mentions,

"What still must be emphasised is that compared to

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the expansion of the black sector associated with

the expansion of the private sector, there is

considerably lesser scope for the expansion of

the black sector in association with the growth

of the public sector.. .A bigger role for the

public sector reduces the correlation between

the growth of the economy and the growth of

black incomes because this may lead to a

decline in the relative size of private sector

whose quest for higher than legally

permissible rates of returns is the bedrock on

which the black economy rests."" As a part of

the strategy of planning, the public sector has

been expanded in heavy and basic industries

and the provision of infrastructure. However,

since controls and regulations are introduced to

mitigate the effect of shortages, it would be

desirable to extend the public